How Workers Compensation Works

American workers find themselves the victims of many different types of calamities, but sprains and strains are most common.

The numbers surrounding workers compensation show how broad and important a program it is. In 2004, $56 billion in workers compensation benefits were paid in the United States. Medical benefits accounted for $26.1 billion of that spending, while cash benefits accounted for the other $29.9 billion. Between benefits and insurance, workers compensation cost employers $87.4 billion in 2004 [ref].

From 1998 to 2001, medical-only cases accounted for 78 percent of all workers compensation cases but only 6 percent of all benefits paid [ref]. This number indicates that workers usually recover fully and return to work, so benefits end.

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In some cases, though, workers return to work without fully recovering (perhaps because a full recovery isn’t possible or is a long way off) and have fewer duties and a smaller salary. Because they are still partially disabled, these workers receive temporary partial disability benefits. Between 1998 and 2001, temporary partial disability benefits made up 65 percent of cases involving cash benefits and 21 percent of total benefits paid.

Workers who are permanently disabled receive permanent total disability benefits. These benefits made up 1 percent of all cases involving cash benefits but comprised 12 percent of benefit spending in 2001. These numbers indicate that significant, permanent disability or impairment is rare but that compensating those who suffer catastrophic injuries or illnesses at work is expensive.

A third class of benefits is permanent partial disability. Workers in this category suffer from permanent impairments that don’t completely prevent them from working again. For example, consider an accountant who is blinded in one eye by an exploding light bulb. The injury affects his life but should allow him to continue working in his previous job. Thirty five percent of cases with cash payments fall under permanent partial disability, making up 67 percent of total spending.

Workplace fatalities have declined since their peak in 1994, but they remain a significant concern.

In 2005, 93 percent of workplace fatalities were suffered by men. Farming, fishing and forestry remain the most dangerous fields in terms of fatality rate [ref].

Construction remains one of the most hazardous occupations in the United States.